Complete Property Market Updates of Singapore

May 9, 2008

K-Reit’s free-float falls below 25% after rights issue

Filed under: General,REIT — Propertymarketupdates @ 2:44 am

But number of free-float units more than doubles

K-REIT Asia’s free float of units will fall to 24.9 per cent from 27.1 per cent following the subscription by the Keppel Group for rights units not taken up by minority shareholders.

The trust’s rights issue of 396.9 million units priced at $1.39 per unit – which was 96.3 per cent subscribed, inclusive of excess rights applications – became fully subscribed after Keppel Corp and Keppel Land mopped up 14.9 million rights units, or 3.7 per cent of the issue, not taken up by minority shareholders.

While the free-float percentage will decline following the rights issue, the absolute number of free-float units will more than double from 67.7 million units to 161.2 million units.

Of the 14.9 million units, Keppel Corp took up 6.3 million units and Keppel Land 8.6 million units in line with their undertakings.

The rights issue will leave Keppel Land with 43.6 per cent of K-Reit’s enlarged equity base of 647.2 million units, and Keppel Corp will control 31.5 per cent. Prior to the rights issue, Keppel Land held 42.6 per cent of K-Reit’s total 250.2 million units, while Keppel Corp had 30.3 per cent.

K-Reit’s rights issue, which closed on April 25, will raise gross proceeds of about $551.7 million that will partly refinance the $942 million bridging loan K-Reit has taken from Keppel Corp to finance the trust’s acquisition of a one-third interest in One Raffles Quay. K-Reit bought the stake in One Raffles Quay from Keppel Land last year.

The $941.5 million acquisition price for the new Grade A office development works out to $2,109 per square foot (psf) of net lettable area. Stripping out income support of up to $103.4 million provided by seller Keppel Land through 2011 to K-Reit Asia reflects a lower net purchase price of $1,877 psf.

In a release yesterday, K-Reit said that based on gross proceeds of about $551.7 million from the rights issue, the trust’s aggregate leverage will be reduced from 53.9 per cent to 27.7 per cent and create for K-Reit about $679.8 million funding capacity based on 60 per cent leverage limit.

In late March, the trust manager’s CEO, Tan Swee Yiow, said in an interview with BT that management will look at a variety of options, including convertible bonds, commercial mortgage-backed securities and straight debt, to raise balance funds needed to repay the bridging loan.

K-Reit said yesterday the rights units will be listed on the Singapore Exchange from 9am on May 8. On the stock market yesterday, K-Reit ended six cents lower at $1.44.

Source : Business Times – 6 May 2008

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Reits rise on bullish Credit Suisse note

Filed under: General,REIT — Propertymarketupdates @ 2:32 am

Units of Singapore Real Estate Investment Trusts (Reits) rose more than 3.5 per cent after Credit Suisse said it preferred the defensive nature of Reits to property developers.

Credit Suisse preferred Frasers Centrepoint Trust for its defensive suburban portfolio and ranks CapitaMall Trust as its top pick, citing long-term growth potential.

CapitaMall Trust, 27 per cent owned by CapitaLand, gained as much as 3.6 per cent to $3.75 (US$2.75) with over 3.3 million shares traded.

Frasers Centrepoint Trust, the property subsidiary of conglomerate Fraser and Neave, surged as much as 4.8 per cent to $1.30 with around 468,000 shares changing hands.

‘We believe S-Reits face lesser downside risks to developers given higher income stability from rentals, longer lease tenures and greater dividends visibility,’ Credit Suisse analyst Shirley Wong said in a client note.

Southeast Asia’s largest property developer CapitaLand fell as much as 0.4 per cent to $7.06 while City Development, the region’s second-largest developer, lost as much as 1.4 per cent to $12.32. — REUTERS

Source : Business Times – 5 May 2008

May 5, 2008

Mapletree assets to hit $15b-20b in a year

Filed under: General,Property Investment,Regulators,REIT — Propertymarketupdates @ 2:24 pm

Mapletree Investments’ total asset size, comprising assets under management as well as on its own balance sheet, has nearly doubled to around $10.5 billion – inclusive of the recently announced acquisition of a $1.7 billion portfolio from JTC Corp – from $5.6 billion a year ago.

In a year’s time, it could grow further to $15 billion-$20 billion, Mapletree Investments CEO Hiew Yoon Khong told BT in a recent interview.

The increase will come largely from new private funds the fully-owned unit of Temasek Holdings is starting, including the US$1.5 billion-US$2.0 billion Mapletree India-China Fund (MICF) focusing on development and opportunistic redevelopment of real estate in the two mega markets. ‘This fund will invest in office, retail and residential property,’ Mr Hiew said.

The first closing, which has just been completed, has raised US$600 million, contributed equally by Mapletree and an international institutional investor that has declined to be named.

The fund’s second closing, slated for July, will also see Mapletree and the investor putting in US$200 million each, with another US$500 million to US$1 billion to be subscribed by third-party investors.

MICF has secured two seed investments in China. One is a residential and retail development named Future City in Xi’an’s Beilin District. The project has a total development value of $196 million and will span almost 1.56 million sq ft in gross floor area. Future City will have four residential towers and a nearly 400,000 sq ft mall to be named VivoCity Xi’an. Construction began in March last year and the development is slated for completion by July 2010. The targeted opening date for the mall is October 2010.

The second seed investment for MICF is an existing office block in Beijing’s Central Business District with a gross floor area of around 400,000 sq ft and an investment value of about $165 million. Upon completion of the acquisition in June 2008, an anchor tenant will lease 35 per cent of net lettable area. ‘We expect to seal a third investment in China soon for MICF – a retail and serviced apartment development in Guangzhou,’ said the 46-year-old former investment banker.

As for India, the fund has identified two investments in Bangalore – an office and residential project, and a pure office development.

Over the next 12 months, Mapletree also expects to start sequel funds to the Malaysia-focused CIMB Mapletree Real Estate Fund (CMREF) and the Mapletree Industrial Fund (MIF). The latter has so far bought some $300 million of non-warehouse industrial properties in Singapore, Malaysia and China. ‘For CMREF 2, we are targeting to raise about RM1 billion (S$430 million); CMREF 1’s RM500 million is almost fully invested,’ Mr Hiew said.

The group has held back plans to float more real estate investment trusts or Reits in Singapore because of unfavourable financial market conditions. One of these is the Mapletree Commercial Trust, which will hold about $3 billion of Mapletree’s Singapore assets in the HarbourFront and Alexandra Road areas. ‘With the deferment, we’ve been focusing on growing the net income of the initial assets planned for the commercial trust and working on building a strong pipeline of assets for possible acquisition by the trust,’ Mr Hiew said.

‘We’ll launch the trust when the market stabilises, hopefully before the end of the year,’ he added.

The centrepiece of the trust will be VivoCity, valued at about $2 billion. Other assets are likely to include nightspot St James Power Station, HarbourFront Centre, PSA Building and Merrill Lynch HarbourFront, which is slated for completion in the third quarter of this year.

The future acquisition pipeline for the trust includes two projects currently under construction – Mapletree Anson, a 19-storey Grade A building at Anson Road/Enggor Street slated for completion in Q3 2009, and Mapletree Business City, which which is expected to be ready in the second half of 2010.

The latter project is being built on the site of the former Alexandra Distripark (Blocks 1-3) and on an adjacent plot at Alexandra Terrace. ‘This will be a modern business campus with about 1.7 million sq ft net lettable area (NLA) comprising an office block and three business park blocks with amenities like a 350-seat auditorium, big function rooms. We’ll have a foyer for cocktails, gym with lap pool, even a childcare centre and convenience store, plus roughly 1,100 carpark lots,’ Mr Hiew said. The development will also have a foodcourt and al fresco-style restaurants.

So far, two  tenants, including a financial institution, have leased a total of about 200,000 sq ft. Mapletree Business City will be integrated with Mapletree’s adjacent properties – The Comtech and PSA Building – to form the group’s Alexandra Precinct assets. PSA Building will be directly connected to Labrador MRT Station under the Circle Line opening in 2010.

As for Mapletree Anson, with about 325,000 sq ft NLA, about 40,000 sq ft has been leased so far. ‘The building’s completion in Q3 2009 will be ahead of the completion of the first phase of Marina Bay Financial Centre,’ Mr Hiew noted.

Plans to float Embassy Reit here – in partnership with India’s Embassy Group – have also been put on the backburner as structuring issues relating to changes in Indian laws on foreign funding and consequential tax issues are being ironed out first. The proposed Reit will hold business parks in Bangalore.

Source : Business Times – 5 May 2008

March 31, 2008

K-Reit may raise more funds after its rights issue

Filed under: Financing,REIT — Propertymarketupdates @ 4:26 am

K-REIT Asia will look at more forms of financing once its $551.7 million rights issue is completed, Tan Swee Yiow, chief executive of the trust’s manager, told BT.
 
The real estate investment trust (Reit) is holding an extraordinary general meeting today to get shareholder approval for a rights issue to raise $551.7 million in gross proceeds – partly to repay the $942 million bridging loan it took from Keppel Corp when it purchased its one-third stake in One Raffles Quay (ORQ) last year.

K-Reit is expected to get the mandate for the rights issue easily enough. But shareholders will want to know what plans the trust has to raise the balance needed to repay the loan.

Mr Tan said that the management is well aware of the need to raise more funds, and will address the issue with ‘appropriate debt instruments’ after the rights issue.

‘The $942 million is a bridging loan and we will have to resolve it somehow,’ said Mr Tan. ‘We will have to address that, but we are not addressing it at the same time as the rights issue because we want to do the rights issue first,’ Mr Tan said.

The rights issue, which will significantly reduce the Reit’s gearing, will put the trust in a better place to negotiate with banks, he said.

Upon completion of the rights issue, K-Reit’s gearing will be cut to 27.7 per cent, from 53.9 per cent at present, which is approaching the maximum allowable limit of 60 per cent.

To raise more funds, K-Reit will look at a variety of options, including convertible bonds, commercial mortgage-backed securities and straight debt, Mr Tan said.

Right now, the rights issue means that Keppel Corp and Keppel Land, which have both given irrevocable undertakings to take up their respective allocations of the rights units, could increase their stakes in the Reit. As at end-February, KepCorp and KepLand together owned 72.7 per cent of the Reit.

Mr Tan said that this ‘can’t be helped’. K-Reit had initially decided to go with a convertible bond and unit issue to finance its ORQ purchase. But the plan had to be called off because of weak equity and credit markets. If the issue had gone through, both KepCorp and KepLand would have reduced their stakes, Mr Tan said.

‘Moving forward, if the situation is appropriate, there is nothing to stop them (KepCorp and KepLand) from reducing their stakes, which is the long-term plan,’ Mr Tan said. He is also Keppel Land’s chief executive for Singapore Commercial.

Source : Business Times – 31 Mar 2008

February 29, 2008

Going private among options for MMP Reit

Filed under: REIT — Propertymarketupdates @ 10:00 am

MACQUARIE Meag Prime real estate investment trust (MMP Reit) will undertake a strategic review that may result in it selling all its units and going private.

If MMP Reit, which owns stakes in Wisma Atria and Ngee Ann City, eventually decides to go private, it would be a first for a Reit in Singapore. In a statement yesterday, the Reit said the review would consider strategies such as allowing unitholders to buy all its units.

Macquarie Real Estate has a 26 per cent interest in the Reit. An associated entity has a 50 per cent indirect stake in the Reit’s manager, Macquarie Pacific Star Prime Reit Management.

Market watchers say going private makes sense, as some Reits are trading at levels below their net asset value per unit.

MMP Reit said the move followed a number of unsolicited offers to Macquarie Real Estate for its stake in the Reit.

‘MMP Reit is trading at a substantial discount to its net asset value, and the strategic review will be designed to explore the means by which this gap may potentially be closed.’

The Reit’s net asset value stood at $1.61 per unit as at Dec 31. Its shares, which were halted from trading yesterday, last traded at $1.08.

Source : Straits Times – 20 Feb 2008

Macquarie may exit MMP Reit under strategic review

Filed under: REIT — Propertymarketupdates @ 9:59 am

MACQUARIE MEAG Prime (MMP) Reit will undergo a strategic review that may see the Macquarie Group sell its stake in the fund.

In a statement, the Reit’s manager – Macquarie Pacific Star Prime Reit Management – said that the exercise aims to enhance the value for all unitholders. It may consider options like merger & acquisitions, full-privatisation or sale of assets, chief executive officer Franklin Heng told BT.

The announcement confirms an earlier BT report that the Macquarie Group, which owns 26 per cent of the Reit, is prepared to exit from the fund under a proposed strategic review.

Indeed, Macquarie Pacific Star said that the move came after the ‘receipt of a number of unsolicited approaches’ made to Macquarie Real Estate, part of the Macquarie Group.

Macquarie Real Estate also has an associated entity that owns a 50 per cent stake in the Reit’s manager.

The key shareholder said it will cooperate with the directors of Macquarie Pacific Star in order to maximise value for all unitholders. The strategic review will be undertaken in the context of strong underlying property fundamentals in the Singapore market.

‘The quality of MMP Reit’s portfolio of real estate assets is supported by MMP Reit’s recent announcement of an increase in its net asset value to $1.61 per unit as at December 31, 2007.’

MMP Reit last traded at $1.08 – a 32.9 per cent discount to its NTA (net tangible asset) and the strategic review will explore options to ‘close this value gap’.

Macquarie Pacific Star intends to appoint Macquarie Securities (Asia) Pte Limited of Singapore to advise it on the strategic review. The entire exercise is expected to be completed by June this year.

Yesterday, the Reit’s manager also cautioned that there is no assurance that the strategic review will result in any specific transaction.

MMP Reit reported a 15.7 per cent year-on-year rise in distributable income to $16.2 million for the fourth quarter ended Dec 31, 2007. The Q4 distribution brought 2007 full year’s distributable income to $59 million, up 7.5 per cent.

Source : Business Times – 20 Feb 2008

Macquarie may sell Reit stake after review

Filed under: REIT — Propertymarketupdates @ 9:16 am

MACQUARIE MEAG Prime Reit is expected to undergo a strategic review soon that may result in the Macquarie group selling its 26 per cent stake in the Singapore-listed Reit, industry sources said.

The move is believed to be prompted by the trust trading at a steep discount to its net asset value (NAV). MMP last traded at $1.06, compared with its NAV of $1.61 as at Dec 31, 2007. Among MMP’s current assets are Wisma Atria and Ngee Ann City.

Macquarie, it seems, has floated the ’strategic review’ proposal to the other two shareholders of the Reit’s manager Macquarie Pacific Star Prime Reit Management – MEAG Munich ERGO Asset Management GmbH and Investmore Enterprises Ltd – both of which are likely to have reservations about the move.

MEAG is part of the Munich Re group, one of the largest reinsurance groups in Germany, while Investmore belongs to the fast-growing Pacific Star group founded by Singaporean entrepreneur Jeff Tay.

Industry observers said that since Macquarie bought into the Reit during the IPO, it has been calling the shots at the Reit and its strategy for growing the Reit’s footprint in Asia does not always agree with those of the other two shareholders.

In the event of a sale, unitholders may raise the question of a potential conflict of interest as Macquarie is the single largest unit holder of the Reit, as well as manager of the Reit and its properties.

Also, some feel that if Macquarie wishes to divest, it should get its own investment bank to carry out a private tender rather than have the Reit manager do so in a public manner that may create uncertainty for tenants, employees and business associates during the review period, expected to take a few months.

Source : Business Times – 18 Feb 2008

February 28, 2008

JTC’s choice of Reit manager raises questions

Filed under: Commercial,Regulators,REIT — Propertymarketupdates @ 11:00 pm

Mapletree is likely to engage a PR drive to dispel any notions of conflicts of interest in its stable.

JTC Corp has finally announced its selection of manager for a proposed real estate investment trust (Reit) that will hold some high-rise, ready-built properties that JTC is divesting.

However its statement, issued earlier this month, announcing the appointment of Temasek subsidiary Mapletree Investments to set up and manage the new Reit begs several questions.

What happened to JTC’s supposed earlier choice of Australia’s Goodman group, which had been widely reported in the Australian media as having clinched the job of the new Reit’s manager – a piece of market talk which JTC had never denied? What brought about a change in JTC’s mind in the preceding few weeks before it made its decision public?

Did adverse equity-market conditions make it difficult for Goodman to proceed with the proposed acquisition of the assets with a view to listing a Reit within a stipulated timeframe, believed to be end-2008?

JTC has said that Mapletree was chosen ‘after a rigorous selection process’ and that ‘all proposals were evaluated based on individual merit against an objective set of criteria’.

But some market watchers would like to have more details of the reasons that led a Singapore government agency to select a fully-owned Temasek unit for the job of Reit manager after receiving ‘quality submissions from a wide range of international and local players’.

There’s also another interesting set of questions being raised: Will Mapletree’s appointment as the JTC Reit manager create conflicts of interest within the Mapletree stable, given that the group has a range of interests involving similar asset classes?

Going forward, to what extent will the various Mapletree or Mapletree-managed entities compete for acquisitions?

Ahead of the initial public offer for the new Reit – planned for mid-2008, depending on market conditions – Mapletree’s management will no doubt be tackling these issues and making clear to the market exactly how the group is delineating its various interests.

Broadly, there are two areas with potential conflict of interest. The first is between the group’s listed logistics Reit, Mapletree Logistics Trust, and the new JTC Reit.

The second is between the privately held Mapletree Industrial Fund and the new Reit.

Let’s take a look at the first. Technically, MapletreeLog invests in logistics assets whereas the new JTC Reit will hold industrial properties like flatted factories and a few business park buildings. The lay investor can be forgiven for thinking these all belong to broadly the same asset class – industrial properties.

Perhaps, what Mapletree will do is to draw a thicker line between the two asset classes, for instance, warehouses for MapletreeLog, and non-warehouse properties for JTC Reit.

Of course, some properties come with a mix of both warehouse and factory space. In that case, Mapletree will probably state upfront its criteria on defining such assets, for the purpose of deciding which Reit they will go to. Perhaps the definition will based on the predominant use of the property. Hence, if say 50 per cent or more of a property ’s gross floor area (GFA) is for warehouse space, it will be classified as a warehouse property, and hence qualify for potential acquisition by MapletreeLog. But if half or more of a building’s GFA is for non-warehouse space, it can be considered for the new JTC Reit.

It will also be interesting to see how Mapletree handles the conflict between the new Reit and its existing private industrial fund. The latter currently holds about $300 million of industrial properties, not just in Singapore but also in Malaysia and China. It has the potential makings of a Pan-Asian industrial property fund. Like many private property funds these days, a natural exit for investors is to eventually float the fund as a Reit. Instead of floating this fund and having it compete with the JTC Reit, one option would be for Mapletree to roll the two into one. That is, the privately held Mapletree Industrial Fund and its assets could be folded into the new JTC Reit and the private fund’s investors be given units in the new JTC Reit in exchange. In other words, they become cornerstone investors in the JTC Reit.

Of course, this would require agreement of all parties, including JTC and the investors in the Mapletree Industrial Fund, on the pricing of assets and other issues. Because Mapletree had from the outset decided that its private industrial fund will hold only non-warehouse assets (to avoid conflict with the listed MapletreeLog), this will make it easier for Mapletree now to fold the private fund with the JTC Reit, in terms of clarity of asset class.

So moving forward, things could become clearer within the Mapletree portfolio. MapletreeLog will pursue warehouse buildings, while the new JTC Reit (or whatever it is eventually named), will hold non-warehouse properties.

Mapletree’s management will probably embark on a public and investor education programme to explain how it is delineating its various businesses to eliminate conflict of interest. Hopefully, it will be able to clear any misperceptions in the market.

Source : Business Times – 13 Feb 2008

February 27, 2008

Mapletree to manage JTC’s industrial property trust

Filed under: Commercial,Developer News,REIT,Rental News — Propertymarketupdates @ 11:29 pm

INDUSTRIAL landlord JTC Corporation has appointed Mapletree Investments to establish and manage a real estate investment trust (Reit) that it plans to list around the middle of the year.

The Reit will acquire some of JTC’s high-rise, ready-built properties, including flatted factories and multi-tenanted business park buildings, said JTC and Mapletree in a joint statement yesterday.

Singapore’s largest industrial landlord first announced its divestment plan in late 2005. It said the move would create a more vibrant market and enable it to focus on strategic industrial developments such as the Jurong Island chemicals hub.

JTC announced last July that it had shortlisted seven firms to manage the Reit.

It also said that it will sell $1.4 billion to $1.6 billion of assets – about 10 per cent of its $10.6 billion portfolio and that part of it will go into a Reit.

JTC chief executive Ow Foong Pheng said yesterday: ‘We received quality submissions from a wide range of international and local players.’

All proposals were evaluated on individual merit against an objective set of criteria, and Mapletree was chosen after a rigorous process, she said.

Mapletree, a Temasek Holdings subsidiary, is the sponsor for Singapore-listed Mapletree Logistics Trust.

The firm has an asset base of about $5.3 billion and assets under management of $2.5 billion across Asia.

Mapletree chief executive Hiew Yoon Khong said: ‘We find the asset portfolio very attractive. It is well diversified in terms of tenancy, location and asset type.’

The properties are also strategically located close to or have good access to the city centre, housing estates, key industrial belts and transport nodes, he said.

They enjoy high occupancy rates, a good quality tenant base and long-staying tenants.

JTC said it will work closely with Mapletree to effect a smooth transition upon the transfer of the selected properties.

The timing for the proposed Reit is around mid-2008 and subject to market conditions, said the joint statement.

The current outlook for initial public offerings is bearish as volatility rocks the stock market.

Singapore’s industrial property market has done well, with prices up 22.7 per cent last year, according to Urban Redevelopment Authority data.

Rents of industrial properties chalked up a stronger 32 per cent growth last year, as the sector had benefited from spillover office sector demand.

Source : Straits Times – 2 Feb 2008

JTC appoints Mapletree to manage Reit

Filed under: Commercial,Developer News,Regulators,REIT,Rental News — Propertymarketupdates @ 11:26 pm

Trust due to launch in middle of the year, subject to market conditions.

JTC Corporation yesterday said that it has appointed Temasek unit Mapletree Investments to establish and manage its upcoming real estate investment trust (Reit). The Reit is set for launch about the middle of this year, ’subject to market conditions’, JTC said.

JTC – Singapore’s biggest industrial landlord – said last July that it plans to sell up to $1.6 billion of assets, a big chunk of which will be pumped into a Reit. Industry players have said that the Reit’s initial portfolio is expected to be worth more than $1 billion.

JTC said that appointing Mapletree is a milestone in its divestment exercise, after it announced a request for proposals to explore the appointment of a Reit manager last year.

‘We received quality submissions from a wide range of international and local players,’ said JTC chief executive Ow Foong Pheng. Mapletree was chosen after a rigorous selection process, she said.

Mapletree aims to grow its capital management business, its chief executive Hiew Yoon Khong has said.

‘This appointment reflects the recognition, both locally and internationally, of our capabilities in managing industrial properties and in structuring and managing Reits,’ he said yesterday. Mapletree already has one Reit – Mapletree Logistics Trust – under its belt.

JTC Reit’s portfolio will comprise a range of high-rise ready-built properties including flatted factories, ramp-up and stack-up factories and multi-tenanted business park buildings, the landlord said yesterday.

The asset portfolio is attractive, Mr Hiew said, adding: ‘It is well diversified in terms of tenancy, location and asset type.’ The properties also enjoy high occupancy rates, a quality tenant base and long-term tenants, he said.

Market sources said that Mapletree beat several competitors to manage JTC’s Reit, including Singapore’s CapitaLand and Australian-listed property and wealth management company Goodman Group.

Previous reports have said that UBS, Goldman Sachs and DBS are in line to underwrite the offer.

Source : Business Times – 2 Feb 2008

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